Charles Goldman E. O. Lawrence Berkeley National Laboratory Michael Kintner-Meyer Pacific Northwest National Laboratory DOE Office of Electric Transmission and Distribution Transmission Reliability Peer Review Washington DC January 28, 2004 New York ISO 2002 Demand Response Programs: Evaluation Results

Overview of Presentation  Evaluation of NYISO 2002 Demand Response Program: –Project Objectives –Stakeholders –Accomplishments Approach Key Findings –Significance Impact of evaluation results on NYISO & NYSERDA Pgms –Deliverables

Project Objectives  NYISO: –Assess Reliability and Market Impacts of DR program(s) –Understand Customer Performance in a Voluntary Emergency DR Program (EDRP) –Understand Barriers to Participation in Day-Ahead Market (Economic) Demand Response Programs  NYSERDA: –Assess Impact and Role of DR Enabling Technology –Assess Sustainability of DR Providers from a Business Perspective

Key Stakeholders and their Involvement Sponsors Project Team Stakeholders NYISONYSERDAU.S. DOE Neenan Associates CERTS: - LBNL - PNNL NYISO PRL Working group UtilitiesNYPSC CSPsCustomersESCOs

Evaluation Approach and Objectives 1 Customer Survey - Base Survey - PRL Audit - Conjoint Survey - Behavior Choice Models 2 Analyze Drivers and Barriers to Participation Identify Preferences for Alternative Program Designs Curtailment Performance Analysis Reliability Benefit and Market Impact Analysis Business Case Analysis for Demand Response Providers 3 4 Characterize Participants Portfolio and Individual Customer Performance Analysis of Program Benefits ($) Sustainable business models for DRPs?

NYISO Electricity Markets Generation Assurance - ICAP Energy - in two sequential markets: Day-Ahead Market (DAM) Real-Time (RTM) Direct-bid Ancillary Services Operating Reserve Regulation Emergency Cost Based Ancillary Services Congestion Protection - the “TCC” ICAP/SCR EDRP DADRP Customer- Supplied Resource Programs

NYISO PRL NYISO PRL Program Features Market Function Eligible Event Notice Payment ICAP Installed Capacity $/kW Market value of ICAP > 100 kW Day-ahead advisory, 2 hour notice EDRP Emergency Capacity Greater of $.50/kWh or RTM LBMP 2 hour notice > 100 kW DADRP Economic Energy Greater of Bid $/kWh or DAM LBMP Bid by 5am, day- ahead, notice by noon 1 MW increments

DR Program: Market Impacts Participants (Enrolled MW) Load Curtailed Events EDRP (1481 MW) ~668 MW 22 hr Downstate; 10 hr Upstate 292 (712 MW)23/17425 MW2001 DADRP ~14 MW (average) 1486 MWH scheduled MWh Program

EDRP Summer 2002 Performance Location: NYC/LI (~20%), Western NY (55~%), Capital (~25%) 1,711 enrolled participants (1,481 MW) Actual Load Curtailed = ~668 MW (avg.) ~75% load curtailment; onsite generation ~20% ISO payments = $3.5M

EDRP Reliability Benefits and Market Price Impacts Reliability benefits: reduction in LOLP valued at $5.00/kWh

Understanding Customer Response: Performance Metrics  Subscribed Performance Index (SPI): ratio of customer’s actual average hourly load reduction to their subscribed load reduction –Indicates customer’s actual performance relative to their commitment  Peak Performance Index (PPI): ratio of customer’s actual average hourly load reduction to their non- coincident peak demand –Characterizes customer’s relative technical potential when compared to similar facilities  Implications: –ISO system operators – how reliable a resource? –ESCOs/CSP and Public Benefits Administrators – who to target?

Performance (SPI) by Business Type and Curtailment Strategy

Curtailment Potential (PPI) by Business Type and Curtailment Strategy 60% 0% 10% 20% 30% 40% 50% Educ.Gov/ Utility HealthMfg.Multi- Fam Office Bldg. Recr/ Casino TradeUnclassified PPI Load/Gen Gen Load Subscribed MW Active Participants Avg. load curtailment = 34% of CBL

Day-Ahead Market “Economic” DR Program: Low Participation and Bidding Activity Fewer customer bids accepted and scheduled in 2002 (~7 MW average) vs Customer offer prices generally low ($50-150/MWh), given DAM price environment

Customer Market Survey and PRL Audit  Base survey: 144 respondents (~17% response rate)  PRL Audit: 35 in-depth telephone interviews conducted by CERTS engineers  Questions on cust. characteristics, enabling technologies, load curtailment strategies, & barriers to DADRP participation

Primary Stated Reason for Not Participating in DADRP  Organizational/institutional –Low program awareness levels –Inability to shift usage (36%) –Inadequate knowledge of requirements (17%) –Concerns about occupant comfort  Economic/Program-design Related –Potential benefits don’t justify risks (30%) –High bid price thresholds (5%) –Short payback periods for DR investments 30% 6% 5% 36% 6% 17% Potential Benefits Don’t Justify Risk Penalty is too severe Payments are too low Unable to shift usage Conflict with contract or rate Inadequate knowledge Base = 63, No response = 81 Barriers

Enabling Technologies for Demand Response Interval Metering Backup Generation Energy Information Tools Communications/ Notification Load Control Enabling Technologies  Long-term persistence and sustainability of customer load curtailments depends on: –Automated load response with “Permission-based” control by customer –“Clean, environmentally acceptable” on-site generation  Web-based near-real time load monitoring seen as very useful  Multiple notification channels facilitate timely response

Few Customers Utilize Automated Load Curtailment Strategies  60% of customers relied on manual approaches during load curtailments  Most manual control without logging, suggesting no integration into O&M procedures  Semi-automated LR more prevalent at larger facilities (>1 MW)  Customers want “Permission-based” load control

Significance: Impacts on NYISO  Improved DR Program Design and Rules –ICAP/SCR program called before EDRP and receive energy payment if called to curtail –Eliminated 10% penalty provision for DADRP  Expanded customer outreach/information program (with NYSERDA and NYPSC) –Subscribed Load increased by 15% in 2003 in ICAP/SCR and EDRP (~1780 MW)  Improved confidence in Load As A Resource among NYISO System Operators –2003: DR Programs called to help restore grid after Northeast blackout (Aug. 15 and 16) –Over 850 MW of load curtailed on Aug. 15 (ICAP/SCR ~360 MW; EDRP ~497 MW) –Market impacts: ~$53M in reliability benefits vs. ~7.5M in payments

Significance: Impacts on NYSERDA  Targeting of public benefits funding –More emphasis on customer training and education (e.g., bidding strategies, load curtailment plans) –Priority for DR projects serving certain geographic zones (NYC/LI) and smaller customer markets  Emphasize role of Load Aggregators: assess DR “business models”  Program integration, marketing and strategy –Integrate DR with EE program strategies in various market segments –Develop long-term DR strategy (getting beyond “crisis”)

Significance: Implications for DOE Transmission Reliability Program  DR enabling technologies: Role and Design Criteria –Role: Necessary but not sufficient condition to elicit sustained customer participation –Large Industrial: process controls already in place; EIS/notification technologies provide incremental value –Comm’l/institutional bldgs: DR needs to be automated, seamless, energy- manager friendly, with minimal impact on occupant comfort  Institutional, market and information barriers also need to be targeted and overcome –Institutional/Organizational: most customers not yet comfortable bidding into “economic” DR program but will respond to system emergency defined by ISO –Market: Load aggregators: DR products are non-standard Customers: wary of investments with long paybacks, DR is not their “core business” and reluctant to undertake behavioral changes –Information: Many customers have limited information on load curtailment potential, optimal DR strategies, methods to value DR investments, and “spill over” benefits of DR enabling technologies

Deliverables  Publications: –Neenan Associates and CERTS (2003), “How and Why Customers Respond to Electricity Price Variability: A Study of NYISO and NYSERDA 2002 PRL Program Performance,” LBNL –Goldman, C. et al, (2002), “Do ‘Enabling Technologies’ Affect Customer Performance in Price-Responsive Load Programs?” LBNL  Technical Briefings –Technical briefing to NYISO Price-Responsive Load Working Group (Nov. 2002). –Technical Briefings to NYISO and NYSERDA on DR program evaluation results (Nov. & Dec. 2002).